Stocks gain with US futures; oil pares drop – BNNBloomberg.ca

U.S. equity futures advanced with European stocks on Wednesday as investors weathered continued volatility in energy markets and perused the latest earnings reports. Oil pared a decline, while gold gained.

S&P 500 Index contracts climbed after the gauge slumped more than 3 per cent a day earlier, when investors shrugged off the progress of a fresh relief package to counter the economic hit from the coronavirus. The Stoxx Europe 600 Index rose broadly in the wake of Tuesday’s slump.

Brent crude erased a tumble that reached 17 per cent earlier, while West Texas oil also pared most of its slide. Treasuries edged lower along with the dollar and European bonds fell. That region’s policy makers plan to hold a call on Wednesday evening where they may discuss whether to accept junk-rated debt as collateral from lenders, officials familiar with the matter said.

Investors are continuing efforts to assess the pandemic’s hit to the global economy, with the oil market chaos suggesting it will be deeper or longer than anticipated by those who drove the S&P 500 up 28 per cent from its March lows. Governments are devising ways to return people to work even as they discover infections are more extensive than they insisted only weeks ago.

The coronavirus killed two people in California in early and mid-February, suggesting the pathogen was circulating in the U.S. weeks earlier than health officials thought. While Germany and a few other countries are moving to relax lockdown measures to contain outbreaks, Singapore — a global standard bearer for taming the deadly illness early on — has now become home to Southeast Asia’s largest recorded outbreak and is racing to regain control.

Meanwhile, corporate earnings have been mixed. Consumer-goods companies from brewers to paint-makers sounded notes of caution on spending. Heineken NV canceled its interim dividend, while Kering said it doesn’t see a recovery in the U.S. or Europe before at least June or July after sales at its flagship brand Gucci tumbled.

“There’s no way you can predict earnings right now,” Michael Cuggino, portfolio manager at Pacific Heights Asset Management LLC, said on Bloomberg TV. “It’s virtually impossible until we have more visibility with respect to how to world comes out of the coronavirus on the other side.”

AT&T on Wednesday joined the list of companies withdrawing their forecasts. Roche Holding AG increased for a fifth day, after the drugmaker said it still sees a small profit gain this year as demand for its medicines holds up while it works on developing Covid-19 tests.

Elsewhere, the Australian dollar rose as better-than-expected retail sales data triggered the unwinding of some short positions. Stocks slipped in Japan but climbed in other major Asian markets. Gold rebounded to US$1,700 an ounce.

These are the main moves in markets:

Stocks

Futures on the S&P 500 Index increased 1.3 per cent as of 7:22 a.m. New York time.

Nasdaq 100 Index futures rose 1.1 per cent.

The Stoxx Europe 600 Index climbed 1.1 per cent.

The MSCI Asia Pacific Index gained 0.3 per cent.

Currencies

The Bloomberg Dollar Spot Index decreased 0.2 per cent.

The euro rose 0.2 per cent to US$1.0875.

The British pound gained 0.7 per cent to US$1.2373.

The Japanese yen strengthened 0.1 per cent to 107.65 per dollar.

Bonds

The yield on 10-year Treasuries gained two basis points to 0.59 per cent.

Britain’s 10-year yield rose one basis point to 0.311 per cent.

The spread of Italy’s 10-year bonds over Germany’s rose one basis point to 2.642 percentage points.

Commodities

West Texas Intermediate crude dipped 1.6 per cent to US$11.39 a barrel.

FILE – In this Thursday, Aug. 31, 2017, file photo, a flame burns at the Shell Deer Park oil refinery in Deer Park, Texas. Oil prices are plunging Sunday, March 8, 2020, amid worries that an OPEC dispute will lead a virus-weakened economy to be awash in an oversupply of crude.

OPEC and allied nations agreed Saturday to extend a production cut of nearly 10 million barrels of oil a day through the end of July, hoping to encourage stability in energy markets hard hit by the coronavirus-induced global economic crisis.

Ministers of the cartel and outside nations led by Russia met via video conference to adopt the measure, aimed at cutting the excess production depressing prices as global aviation remains largely grounded due to the pandemic. The curbed output represents some 10% of the world’s overall supply.

But danger still lurks for the market, even as a number of nations ease virus-related lockdowns, and enforcing compliance remains thorny.

Algerian Oil Minister Mohamed Arkab, the current OPEC president, warned meeting attendees that the global oil inventory would soar to 1.5 billion barrels by the mid-point of this year.

That was a message echoed by Saudi Oil Minister Abdulaziz bin Salman, who acknowledged “we all have made sacrifices to make it where we are today.” He said he remained shocked by the day in April when U.S. oil futures plunged below zero.

The decision came in a unanimous vote, Energy Minister Suhail al-Mazrouei of the United Arab Emirates wrote on Twitter. He called it “a courageous decision.”

But it is only a one-month extension of a production cut that was deep enough “to keep prices from going so low that it creates global financial risk but not enough to make prices very high, which would be a burden to consumers in a recessionary time,” said Amy Myers Jaffe, senior fellow at the Council for Foreign Relations.

“There is so much uncertainty that I think they took a conservative approach,” she said. “You don’t know how much production is going to come back on. You don’t know what’s going to happen with demand. You don’t know if there’s going to be a second (pandemic) wave.”

Jaffe said improved oil demand in China and Asia and a gradual stabilization of demand in the United States and to some extent Europe, where there’s some cautious economic reopening, were encouraging for producers.

OPEC has 13 member states and is largely dominated by oil-rich Saudi Arabia. The additional countries involved part in the so-called OPEC Plus accord have been led by Russia, with Mexico under President Andrés Manuel López Obrador playing a considerable role at the last minute in the initial agreement.

Crude oil prices have been gaining in recent days, in part on hopes OPEC would continue the cut. International benchmark Brent crude traded Saturday at over $42 a barrel. Brent had crashed below $20 a barrel in April.

Earlier this year, when demand was down, Saudi Arabia was flooding the market with crude oil, helping to send prices down to record lows. That prompted the U.S. government in April to take the unusual step of getting involved in OPEC’s negotiations, pressuring members of the cartel to agree to cuts to help end the oil price free-fall.

At the time, President Donald Trump said the U.S. would help take on some of the cuts that Mexico was unwilling to make. And perhaps more importantly, a group of U.S. senators upset over the impact on U.S. shale production said at the time that they had drafted legislation which would remove American forces, including Patriot Missile batteries, from Saudi Arabia.

Under a deal reached in April, OPEC and allied countries were to cut nearly 10 million barrels per day until July, then 8 million barrels per day through the end of the year, and 6 million a day for 16 months beginning in 2021.

In a rambling Rose Garden speech on Friday, Trump took credit for the April deal. “People said that wasn’t possible but we got Saudi Arabia, Russia and others to cut back substantially,” he said. “We appreciate that very much.”

U.S. Energy Secretary Dan Brouillette tweeted his applause Saturday for the extension, which he said comes “at a pivotal time as oil demand continues to recover and economies reopen around the world.”

Tucker made the claim in private representations to British Prime Minster Boris Johnson’s advisers, the newspaper reported https://www.telegraph.co.uk/business/2020/06/06/hsbc-warns-downing-street-chinese-reprisals-huawei, citing industry and political sources.

Britain designated Huawei a “high-risk vendor” in January, capping its 5G involvement at 35% and excluding it from the data-heavy core of the network. It is looking at the possibility of phasing Huawei out of its 5G network completely by 2023, according to officials.

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Tucker made the claim in private representations to British Prime Minster Boris Johnson’s advisers, the newspaper reported here citing industry and political sources.

Britain designated Huawei a “high-risk vendor” in January, capping its 5G involvement at 35% and excluding it from the data-heavy core of the network. It is looking at the possibility of phasing Huawei out of its 5G network completely by 2023, according to officials.

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